Canada: Government Responds to Feedback on Canada Emergency Wage Subsidy with Proposed Changes

UPDATE: On May 15, 2020, the federal government announced several actions relating to the CEWS program, which we provide details of here.  

UPDATE: On May 8, 2020, Prime Minister Justin Trudeau announced in a press conference that the Canada Emergency Wage Subsidy (CEWS) will be extended beyond June 6, 2020, and that details regarding the extension will be released during the week of May 11, 2020.

UPDATE: On April 11, 2020, the federal government introduced and passed Bill C-14, A second Act respecting certain measures in response to COVID-19.  Among other things, Bill C-14 amends the Income Tax Act to make the 75% Canada Emergency Wage Subsidy (CEWS) law.  We have kept you informed with regard to the federal government’s legislative process since the CEWS was first announced in late March 2020, including the changes the government made to the CEWS since it was originally announced, and the additional features announced on April 8, 2020.  These developments may be reviewed in the ASAP below and the links within the ASAP. 


On March 30, 2020, the federal government released details about the Canada Emergency Wage Subsidy (CEWS) it will provide to employers impacted by the COVID-19 pandemic.  Since releasing these initial details to the public, the government received feedback from across the country.  On April 8, 2020, Prime Minster Trudeau confirmed that changes will be made to the CEWS in response to the feedback, “to address the realities faced by the not-for-profit sector, high growth companies and new businesses.”  On that same day, the government published a News Release announcing the changes. The government’s webpage for the CEWS now reflects the changes.    

Please note that all details regarding the CEWS, including the changes to the CEWS announced on April 8, 2020, have not been passed into law.  Parliament still needs to be recalled (shortly) to debate and enact a new Bill.  As a result, it is possible that there may be further changes to the CEWS program. 

Subject to the legislation, the changes to the CEWS announced on April 8, 2020, are:

Revenue Comparison Period: To measure their revenue loss, employers will have the flexibility to compare their monthly gross revenue in March, April and May 2020 to that of the same month in 2019, or to an average of their gross revenue earned in January and February 2020. 

Revenue Decline Benchmark for March:  For March, the 30% gross revenue loss benchmark will be reduced to 15%, in recognition of the fact that many businesses did not begin to be affected by the COVID-19 crisis until partway through the month. 

Accounting Rules for Measuring Revenues:  Employers will be allowed to measure gross revenues either on the basis of accrual accounting (as they are earned) or cash accounting (as they are received).  This change was made in recognition that the time between when revenue is earned and when it is paid could be highly variable in certain sectors of the economy.  In addition, special rules will also be provided to address issues for corporate groups, non-arm’s-length entities and joint ventures.   

Registered Charities and Non-profit Organizations: Registered charities and non-profit organizations will also benefit from the additional flexibilities being provided to employers with respect to the gross revenue loss calculation. In addition, to recognize that different types of organizations are experiencing different types of funding pressures, charities and non-profit organizations will be allowed to choose to include or exclude government funding in their revenues for the purpose of applying the applicable revenue loss threshold.

100% Refund for Certain Employer Contributions to Social Assistance Programs: On the government’s webpage outlining the details of the CEWS program, it states that the government is proposing to expand the program by introducing a new 100% refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.  Employers would be required to continue to collect and remit employer and employee contributions to each program as usual.  Eligible employers would apply for the refund at the same time that they apply for the CEWS.

Calculation of the Subsidy: The government website page outlining the details of the CEWS program also indicates that the subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 would be the greater of:

  • 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
  • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.

In practical terms this means that employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages or salaries of existing employees. These employers would be expected where possible to maintain existing employees’ pre-crisis employment earnings. 

The pre-crisis remuneration for a given employee would be based on the average weekly remuneration paid between January 1 and March 15, inclusively, excluding any seven-day periods during which the employee did not receive remuneration.

Interaction Between the CEWS and the Canada Emergency Response Benefit (CERB): Furthermore, on the government website page for the CEWS, clarification is provided regarding the interaction between the CEWS and the Canada Emergency Response Benefit (CERB).  It states that eligibility for the CEWS of an employee’s remuneration will be limited to employees who have not been without remuneration for more than 14 consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6. The government notes that this rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the CERB.  The government encourages all eligible employers to rehire employees as quickly as possible and to apply for the Canada Emergency Wage Subsidy if they are eligible. To ensure that the CERB applies as intended, the Government will consider implementing an approach to limit duplication.  This could include a process to allow individuals rehired by their employer during the same eligibility period to cancel their CERB claim and repay that amount.

Penalties for Abuse of the CEWS: In a press conference on April 8, 2020, Finance Minister Bill Morneau indicated that employers that abuse the CEWS program will be subject to penalties of up to 225% of the subsidies received, and up to five years in prison.  These penalties were not mentioned in the News Release dated April 8, 2020, nor are they referenced currently on the government’s webpage outlining the details of the CEWS.

Timing: When he addressed Canadians on April 8, 2020, Prime Minster Trudeau stated that the federal government’s aim is to have the CEWS program up and running in three weeks. 

We will follow developments as they unfold. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.